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Pfizer’s Latest Twist on ‘Pay for Delay'

Pfizer is adding yet another twist to its efforts to delay generic competitors. As The New York Times reports, the company seems to have struck a deal with certain pharmacy benefit managers — the middlemen in the pharmaceutical industry — to block generic versions of Lipitor.

Pharmaceutical companies have sought for years to protect their expensive brand-name drugs by paying generic rivals handsome sums of money to put off efforts to introduce cheaper, generic alternatives that could steal market share.

The controversial practice, known as “pay for delay," occurs as part of patent litigation settlements and typically buys a brand-name drug company more time to sell its blockbuster drug exclusively until its patent on the drug expires. Federal Trade Commission regulators have said the practice costs consumers an estimated $3.5 billion each year, and have pushed for a ban.

But now it appears the drug company Pfizer is adding yet another twist to its efforts to delay generic competitors. As The New York Times reports, the company seems to have struck a deal with certain pharmacy benefit managers — the middlemen in the pharmaceutical industry — to block generic versions of Lipitor.

Lipitor, Pfizer’s blockbuster cholesterol-lowering drug, is among the world’s best-selling pharmaceuticals, and this isn’t Pfizer’s first attempt to protect it.

In 2008, the company settled patent litigation with Ranbaxy, an Indian generic manufacturer, striking a deal that guaranteed that Pfizer would not have to face challenges from Ranbaxy’s generic version of Lipitor until the end of November 2011. Pfizer granted Ranbaxy some incentives as part of the bargain but said it made no payments. Nonetheless, a group of pharmacies filed suit against Pfizer and Ranbaxy last week over the deal, calling it “an extraordinary ripoff” and alleging price-fixing between the two companies.

Now that it's November 2011, Ranbaxy and other drugmakers are gearing up to offer cheaper versions of Lipitor. As The Times reports, Pfizer has tried to counter this competition by offering big discounts on Lipitor to the middlemen that process prescriptions for pharmacies and other buyers, giving them discounts in exchange for having them block generic versions of Lipitor for another six months. Here’s The Times:

Many drugstores are being asked to block prescriptions for a generic version of Pfizer’s Lipitor starting Dec. 1, when the company loses its patent for the blockbuster cholesterol drug and generic competition begins.

Medco Health Solutions, among the nation’s largest pharmacy benefit managers, is one of the companies issuing instructions, seeking to have pharmacists keep filling prescriptions with the more expensive Lipitor for six months.

See some of those instructions sent to pharmacies by the pharma middlemen. The documents were released by Pharmacists United for Truth and Transparency, a group of independent pharmacists. (We first noticed them posted at the blog Pharmalot.)

According to the group, Pfizer’s plan would mean that customers at the pharmacies serviced by these middlemen would receive Lipitor even when they’ve been prescribed a generic version. Because Lipitor co-pays would also be reduced to the level of generic co-pays, customers might not notice, but employers and Medicare Part D would pay the same amount as before, despite the availability of a cheaper alternative.

A Pfizer spokesman gave The Times a statement saying that the company was committed to ensuring that customers had access to Lipitor but declined to answer additional questions. We've also asked Pfizer for comment and will update when we hear back.

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